BY
MARICHU VILLANUEVA: UNFREEZING OIL PRICES
MANILA, NOVEMBER 14, 2009 (STAR) COMMONSENSE By Marichu A. Villanueva - The looming gasoline supply shortage has been artificially created by the oil price freeze imposed by the Arroyo administration. This has again shown that the government’s populist remedies cause more harm than good.
For the last nine years in office, President Arroyo has stayed out of direct intervention every time there were strong public pressures to stop the so-called “Big 3” from raising their oil prices. As an economist herself, she has frowned on government price control as disruptive of market forces but would rather allow the law of supply and demand to prevail.
In fact, she resisted direct government intervention on the domestic prices of gasoline and other refined oil products at the height of the price spiral of crude oil in the world market when it breached historic highs of over $150 per barrel last year. The “Big 3,” — Pilipinas Shell, Chevron (formerly Caltex), and Petron, plus independent small players went on with their weekly increases in the pump prices of gasoline and other refined oil products.
Pump prices went up by 50 centavos to as high as P2 per liter. When the price of crude oil in the world market eased up later last year, the “Big 3” as well as the independent players slowly rolled back their prices.
What prompted the Chief Executive to intervene and to impose temporary freeze on oil prices only gave rise to suspicions over her motives. With just barely eight months left in her term, why does President Arroyo need to take such populist measure?
The oil price freeze took effect by virtue of Executive Order (EO) 839 that the President issued on Oct. 23. It directed the local oil industry to keep the prices of all their refined petroleum products at Oct. 15 levels. The EO was issued after a state of calamity was imposed over Luzon following the widespread devastation caused by typhoons Ondoy and Pepeng. The price freeze would be in effect for the duration of the state of calamity.
Some of the oil companies, particularly the smaller players, claimed that their supplies of finished products were running out since the price freeze was enforced. Naturally, this will happen because they would not import refined oil products at prices that would result in marginal losses on their part. It took Pilipinas Shell two weeks after to file a petition before the Makati Regional Trial Court to ask for a temporary restraining order on EO 839. Through their lawyers, Shell claimed EO 839 was unconstitutional and therefore should be lifted immediately.
Amid the furor it stirred, the Chief Executive has directed the National Disaster Coordinating Council (NDCC) to review the state of calamity imposed over Luzon after business groups backed the calls of the oil industry to immediately lift the price freeze on petroleum products. In the first place, the President should have consulted with the NDCC before she agreed to impose oil price freeze all over Luzon.
Now that EO 839 has become a hot potato, she threw it to the NDCC. What perplexes me up to now is the lack of transparency on the part of Malacañang in not making an official announcement on the issuance of EO 839.
The public came to know about EO 839 when this was already published at The Manila Times in a legal notice that appeared on Oct. 24, or a day after the President signed this. The publication in entirety of the executive fiat is a legal requirement before it could take effect. That’s why.
None of the Palace officials who conduct their daily press conferences, however, even bothered to announce about the issuance of EO 839. I personally learned about its issuance after I read the legal notice that appeared the next day. I had to ask our Palace reporters if anyone from the battery of Palace spokesmen mentioned about its issuance in their regular press briefing the previous day.
So The STAR was the first to break the news about the President’s issuance of EO 839. This created public awareness of the imposition of the oil price freeze that the Palace forgot to do in the first place. Mere publication of the executive fiat in a national daily complied with the legal requirement.
But this publication of a legal notice does not supplant the government’s duty to inform, explain, and to educate the public on a very vital policy such as imposing an oil price freeze. While EO 839 has a limited scope only in Luzon, it has obviously a nationwide effect, impact and consequence.
Due to its lack of transparency, the Palace gave fuel for those with political plans in the May 2010 elections, to jump at this opportunity to attack EO 839 and squeeze brownie points for themselves.
Unfortunately for Department of Energy Secretary Angelo Reyes, the attacks hit him directly although for sure he was among the last to know about the issuance of EO 839. But like a good soldier that he was, the retired General is capable enough to defend himself no matter how thin the grounds he stands on.
As of press time yesterday, the Joint Task Force of DOE and the Department of Justice have reportedly endorsed to the President the lifting of EO 839. The same recommendation was purportedly submitted by the NDCC that the state of calamity no longer exist to justify the lifting of EO 839. This is a gracious way out of this sticky oil situation.
We are now hearing Senators and Congressmen calling for a review — belatedly though — of RA No. 8479, or the Oil Deregulation Law of 1998. For Congress inaction on previous pending proposals to review the Oil Deregulation Law, a consumers group — the Social Justice Society (SJS) — filed a “declaratory relief case” before the Manila court. The petitioners sued the “Big 3” for alleged “cartel-like” pricing of their oil products.
But the law of supply and demand is something not for Congress to repeal or legislate. Neither could the courts overrule it. It’s the natural consequence of market forces that should play themselves out with least interference. The only time the State enters the picture is when there is evident manipulation of market forces. President Arroyo knew something that we didn’t when she signed EO 839. The burden is on the “Big 3” to disprove it.